The Third Rail

You wanna cut? We’ll show you cuts. That seems to be the new mantra Democrats have adopted in response to the GOP’s assault on spending. Dems this week have suggested expanding the debate from discretionary spending to taking on all of the sacred cows: farm subsidies, Medicare, Medicaid, taxes and the Pentagon. Well, almost all. What’s missing? Social Security.

Social Security is poised to be a potential deal breaker on bipartisan efforts to reduce the long-term deficit. Democrats on both ends of Pennsylvania Avenue have suggested that the entitlement program is not part of the problem and should be addressed on “a separate but parallel track,” as White House Office of Management and Budget Director Jacob Lew told reporters last week. “Democrats are ready to work with Republicans to find a responsible way to cut spending,” said Majority Leader Reid’s spokesman Jon Summers, “as long as it protects our economy and the Americans who rely on programs like Social Security.”

Democrats are hoping to expand the debate over the 2011 budget to encompass not only short- and long-term deficit reduction, but also a vote to increase the debt ceiling as the Treasury Department nears bumping up against the federal borrowing limit. They certainly have timing on their side.

The Senate has yet to begin negotiations on their 2011 funding bill. Vice President Biden, who is meant to be leading the talks, is on a foreign trip this week, though he called congressional leaders on Wednesday from Moscow. Both parties have already acknowledged that a second two-week extension of federal funding like the one passed at the beginning of March will be needed to avoid a government shutdown next Friday. A third extension may also be required. As those delays drag on, a vote on the debt ceiling is approaching, likely at the end of April or early May. Negotiators say they hope to attach whatever grand bargain they can reach on deficit reduction to that crucial bill. Inaction on the debt ceiling risks causing the U.S. to default on its sovereign debt, which economists say would be catastrophic for the economy.

So, Dems argue, why not roll all three pieces – short-term cuts, long-term deficit reduction and the vote on the debt ceiling – together into one vote, thus limiting the number of opportunities Republicans will have to take a chainsaw to the budget? Republicans have balked at this idea and would prefer to do each one at a time. “We need to crawl before we can walk and that means finishing last year’s business and complete a spending bill,” says House Speaker John Boehner’s spokesman Michael Steel. The House, though, has little control over what the Senate sends them.

The biggest hurdle for the Democratic plan may be Social Security. While Republican House Budget Committee Chairman Paul Ryan last month initially indicated he was willing to focus more on Medicare and Medicaid than on Social Security, the GOP position in recent days seems to have turned. Boehner last week insisted that Social Security be left on the table. “I offered to the President we could lock arms and walk out and begin the conversation about the size of the problem,” Boehner told the Wall Street Journal, noting his disappointment that the President has “shrank from his responsibility to lead.”

Republicans say Social Security must be part of the equation because the IOUs the government owes the program, after raiding its coffers for decades, are part of the problem. Democrats point out that Social Security ran a surplus up until this year and insist the trust fund will still help ensure years of solvency. “Both sides are hardening unfortunately in opposite directions,” says Senator Dick Durbin, an Illinois Democrat and one of six senators working on a grand bargain on deficit reduction. “The majority of Democratic senators would prefer keeping Social Security separate.”

Why are Democrats so sensitive about the politics of Social Security? Obama lost seniors in 2008 by 8 points – the only age group John McCain won. The gap widened in the 2010 midterm elections when Democrats lost seniors by 21 points after Republicans ran relentless ads trumpeting the $500 billion Democrats took out of Medicare as part of their health reform overhaul. And now Obama’s political team and congressional Democrats worry that messing with Social Security, one of the most popular programs in government, right before the 2012 election could cede further ground. For the first time ever, Republicans in January overtook Democrats in Rasmussen polling on the question of which party voters trust more to handle Social Security. In other words, this is one third rail Democrats don’t feel they can afford to touch, even if Republicans are offering to grasp it with them.